monday morning president obama took to the white house rose garden, where appearing in front of the very doorknobs that might be hitting him in the ass next november, he talked death and taxes. >> today i'm laying out a set of specific proposals to finish what we started this summer. >> jon: you mean fort awesome? [laughter] treehouse i was bidding on the white house lawn. >> it's a plan that reduces our debt by more than $4 trillion and achieves these savings in a way that's fair. >> jon: what we'll do is one at a time excuse ourselves to go to the bathroom. then we will climb out of the window and into canada. [laughter] seriously, what's the plan? >> it comes down to this: we

have to prioritize. either we ask the wealthiest americans to pay their fair share in taxes, or we have to ask seniors to pay more for medicare. we can't afford to do both. either we gut education and medical research, or we've got to reform the tax code so that the most profitable corporations have to give up tax loopholes that other companies don't get. we can't afford to do both. this is not class warfare. it's math. [applause] >> jon: let me say this: barack obama knows one thing. you can never go wrong appealing to americans' love of math. [laughter] probably something he stole based on the hugely popular online role playing game "world of mathcraft."

my character rhombus wears the pythagoras hat. that's how your going to sell your program? it's not war, the thing we're best at, it's math, the thing we're 365th in the world at, or as we like to think of it, the top 10%. the president has drawn stark policy difference between himself and his opponent. we must raise taxes on the wealthy or risk the very fabric of our 07-year safety social net. the republicans must be able to counter this by putting a human face on the burden this will place on our most vulnerable wealthy. cue louisiana governor republican and small business owner of a small business sandwich shot john fleming. >> the "wall street journal" estimated your business, a

subway sandwich shop, breakthrough you last year over $6 million. >> yeah, that's before you play 500 employees. the amount i have to reinvest in my business is $600,000 of that $6.3 million. by the time i feed my family, i have maybe $400,000 left over to upgrade, buy more equipment. [audience reacts] >> jon: settle down. let's ignore for a moment that this gentleman seems to have an incredibly [bleeped] accountant who has advised him to pay personal income tax on money he reinvests in his business, blow past the fact that under obama's plan enstead of having $400,000 you'd have $381,000, let's focus on the $200,000 you say a year

you need to fay your family. now -- [laughter] i'm going to tell you something you may not know. there is a place where you can buy a full 12 inches of meat subfor $5. [cheering and applause] now, by my calculations, $200,000 will buy you 40,000 feet of food. that is eight miles of room temperature honey cured technically, turkey. perhaps you've heard of these places. they're everywhere! so problem solved. >> again, if you go after the higher-income earner, you're also going after the job creators, so whatever is cut out of those earnings is money taken out of capital for ren investment for creating more

jobs, opening up more locations. >> jon: more locations at long last, sir? we don't need more subways. i'll show you, we sent wyatt cenac to the nearest subway. wyatt, where are you right now? >> i'm right here, jon. [cheering and applause] >> jon: by the way, the only reason they opened a subway next to our study row is the one inside our studio couldn't handle all the business. it's right over there. you don't normally see it on camera. but it smells like a left of bread took a [bleeped]. so that's fine. taxes go up. [laughter] taxes go up. you may find yourself at times more than 20 sandwich lengths away from the next subway store.

they are plentiful. but there is sadly only one papa bear. >> if you tax achievement, some of the achievers are going to pack it in. again, let's take me. my corporations employ scores of people. they depend on me to do what i do so they can make a nice salary. if barack obama begins taxing me more than 50%, which is very possible, i don't know how much longer i'm going to do this. i like my job but there comes a point where taxation becomes oppressive. [laughter] >> jon: so if taxes are raids, bill o'reilly might quit his fox job? [cheering and applause] well, that, that brings us to our new segment, no, stop, bill,

don't, please. no. [laughter] i shouldn't poke fun. bill is just standing up for a shrinking exploited minority. >> right now taxpayers with incomes above $1 million represent just .2%, not 2%, .2% of all income tax returns. yet the million dollar babies pay 21% of all the federal income taxes. >> millionaires are disappearing from america. >> jon: the super rich will go extinct. we'd add them to the england dangerrered species list, but you now how much they despise government regulation. oh, cruel irony.

people, every day america loses more and more millionaires to abusive individual and corped rat tax breaks. their habitats are slowly disappearing. their watering holes are drying up. if we don't act quickly, these once-plentiful creatures will be relegated to zoos and heartbreaking documentaries. hi, i'm jon stewart. [cheering and applause] [laughter] will you be an angel for a helpless multimillionaire? every day james meriweather phillips, james to our domestic staff, and thousands more like him live in fear that the top marginal tax rate will be raised

from its current 35% to 39.6%. but you can help. for just most of what you earn in a year, you can help james make up that difference. call now because he wants the money now. we'll be right back. >> jon: hey, i'm about to

interstrew governor of indiana, mitch daniels, and from what i understand, it's going to go very long, so what we're going to try to do is, with as few cuts as possible, present it in a way that is coherent and makes sense and everything else will be up on the web, so, i mean, i know how you kids on the web like the watch people talk to governors. [laughter] his new book is called "keeping the republic: saving america by trusting americans." please welcome to the program governor mitch daniels. [applause] thank you for joining us. "keeping the republic: saving america by trusting americans," and you've met us, americans.

>> you asking me? i've met a few. >> jon: and you still trust us? [laughter] >> i can make an exception in your case, jon. >> you've seen the "dancing with the stars" controversy. so for you, now obviously you were... you are still spoken of in very i think almost sacred terms as the fiscally responsible governor that could save the republican party, that could be president. a woman in the audience tonight would very much like you to be president or at least vice president. >> jon: >> one woman? >> jon: it's our audience. i don't know what to tell you. [five minutes later] >> jon: the trouble with the plan, they keep saying, the government is out of control. they're spending more than they take in. they're crazy. they're like drunken sailors,

but when they were in charge, they had an unpaid-for medicaid bill of a trillion dollars, they had two wars. they didn't raise taxes during two wars. that contributed to the deficit. using that study that i have, and we have it to put up, pew, whatever the name of that research center is, the 2001, 2003 tax cuts responsible for $1.7 trillion. the iraq wars, apparently the stimulus and all that was only responsible for $700 billion of that. it's hard to listen to those folks and take them seriously because what it sounds like they're saying, "we need to stop spending when democrats are in charge, but when prince are in charge, we need to just do whatever we do." >> after 9/11, i forgot this and somebody sent me a copy. i went to the national press club on behalf of the administration and said, look how much spending was cut. if we're going to be in the war, then other priorities ought to

be postponed for a while, and that's what harry truman did when we went into korea, what f.d.r. did when we went into world war ii, and it's very fair to say, republicans were in congress, i got nowhere with that argument. you're quite correct. the costs were added on. i'm just saying that when you look forward at the problems that alarm me, and i really believe should alarm every american who cares about the american promise of upward mobility that's at the heart of this country, then relit gaiting that is not going to get us very far. the real question is what steps can we take to... >> jon: that's a fair point. when we come back then we'll talk a little bit about the steps that we can take and we won't re-litigate. we'll be >> jon: all right

we're back. we're talking with governor mission daniels. we've been dancing around, but getting more directly to the point, it seems like the republicans are doing everything they can to protect the wealthiest people in this country through policy and through rhetoric. and i guess i'm just not understanding why. and i'm having a problem. this decade has not been a bad decade for the wealthiest of americans, and if they are the job creators, why are they not

creating? >> [cheering and applause] what is it that we're doing? it feels like false argument to me. >> well, jon, you've got the wrong guest if that's your question because i've been telling my fellow citizens for as long as i've been... this is the only elected job i ever intend to be in. it is not our business to see the people of great means make more money. it is our business to see the people without much money have chance to make more. that's what's bothering me. >> jon: so you're a socialist? >> socialism is a very effective mechanism for spreading misery. that's why i'm not. >> jon: in your mind, is the rhetoric you're hearing from your party misguided? >> well, i think it can stand some improvement. that's the biggest point of this book. i've been trying to say to folks who generally look at the world as i do, first of all, you know, let's try to speak the language

of unity. the problems we face are going to take a very large consensus of people, people who disagree about other things will need to get together and say, let's take the steps that will save us all. no one will suffer more if we drift over fiscal nighing a remarks which we are mathematically certain to be headed for if we don't make a few changes. no one will suffer more than the most vulnerable people. they always do. but it's a practical question, and i'm open minded, and i think other people should be. i've said here and in other places, i'll be happy to tell you what i think the best way to get more revenue to, get more economic growth, to get the spending, the unaffordable spending down, so let's do that. but you have a second best way, bring it on, let me hear it. >> jon: so in the language of unity, what would be your three steps, your prescription? the prescription i've heard from the president appears to be cut

spending in certain areas and raise taxes on the top 1% or allow the bush tax... >> i don't know about cut spending. i keep being reminded of st. augustine, lord, make me chaste, but not just yet. >> jon: what would you do? >> we ought to save the safety net. you start by saying the people who rely on social security and medicare today, don't worry about a thing. nothing should change for you or even for those people approaching the system. you are good to go. a deal is a deal. now, please help us create a social security 2.0 starting in the future so that younger people who are paying for your retirement now have a chance to be protected, too. that system should not... the president's obsession with wealthy people, fine, but i think he's looking in the wrong place, everybody should contribute. they should start with the benefits. why are we sending warren buffett a pension check. >> jon: go back for a second.

the president's obsession with wealthy people. does he have an obsession? >> i'm glad to see... >> jon: with raising the tax rate to the clinton era, is that an obsession in do you really consider that this president has been bad for rich people in this country? or wall street or anything? >> that's not what i mean. it's the constant bashing. you can confiscate all the wealth of those people and we wouldn't be anywhere. >> jon: let me go to the language. "obsession," "bashing" and "confiscate." i understand the language of unity, and i'm not sure that that's it. so... and i think that... i'm going to tell you this, so in the last decade here, the top 1% have taken nearly 25% of the income. 25 years ago it was 1%. nobody has done better in this country than those people. i'm included in it. and to ask them to do that, i

don't understand this hard line,s that class warfare, but somehow making the median in this country, 50%, which now controls 2.5% of the wealth, that that policy is not class warfare, but talking about raising the rates 4%,s that class warfare. i don't understand that. [cheering and applause] it really is i think... and as much as... clearly you're incredibly smart, respected guy, but the language that you just used and slipped into quite easily... >> well, if i got a little defensive because you're asking me to defend positions i haven't taken. look, i'll say it again, i think the heart of our challenge is to restore and strengthen the upward mobility in this country and the possibilities for a stable and a hopeful middle class.

and it's a... these are practical questions. you know, i think if you had a more pro-growth tax system, the kind i described earlier, the kind the president's commission, headed that same direction, a lot of people are, you'd have a separate discussion about the rates. the only question i have about rates, i'm with you on fairness. i want to make sure we don't shoot ourselves in both feet by raising them to a point where they begin to hurt economic growth. growth is the absolute essential both for prosperity and for fairness. [seven minutes later] >> jon: here's what i would say. no, they're lovely people. i apologize if you feel like i was asking you questions about things that you don't know. the problem is it's very difficult to get paul ryan or those types of folks to come on and really answer in an honest way about what they're saying on these types of shows. and the reason i was excited to have you on is because of your reputation as a smart fiscal conservative that was not... so

i apologize. >> well, i hope you -- i didn't let you down. >> jon: you didn't let me down. and honestly, i'm just excited to have anybody else, when i meet them, we're the same height. that's the truth. "saving the republic." it's on the bookshelves now. [cheering and applause] >> jon: that's our show.

join us tomorrow night at 11:00. here is your moment of zen. >> spedding is out of control. giving the federal more>> stephe on the road to financial ruin? and if so, which side are they driving on? then protesters try to shut down wall street, though if they give them the time, wall street might do it for them. and my guest daniel yergin has a new book about the future of energy. i hope we fuel our factories by burning books. [laughter] the federal reserve wants to stimulate the economy. well then ben bernanke's going to have to show a little leg. this is "the colbert report." captioning sponsored by comedy central [theme music playing]